Auction markets in everything
Daniel Lippman sends me notice of the following:
The Exchange Bar & Grill, set amid the bustling shops and pubs of the Grammercy Park neighborhood, is replete with a ticker tape flashing menu prices in red lettering as demand forces them to fluctuate.
Customers can move prices for all beverages and bar snacks such as hot wings ($7 for 6 pieces) or fried calamari ($9). The prices will fluctuate in $.25 cent increments, but will most likely plateau at a $2 change in either direction.
A glass of Guinness starts at $6 but could be pushed to a high of $8 or a low of $4, depending on popularity.
So if one drink is in heavy demand, its price will rise, causing the cost of other equivalent drinks to drop. A rush on a particular beer would increase its price, and cause other beers to drop.
It is, of course, a marketing gimmick. Daniel also sends along a link on the new idea of eco-sex.
Review copies waiting in my pile
1. Acting White: The Ironic Legacy of Desegregation, by Stuart Buck.
2. Prophet of Innovation: Joseph Schumpeter and Creation Destruction, by Thomas McCraw, new in paperback. I loved this book, you can Google back to my previous reviews.
3. Anthony de Jasay, Political Philosophy, Clearly: Essays on Freedom and Fairness, Property and Equalities. This one is a Liberty Fund edition.
4. The Great Reset: How New Ways of Working and Living Drive Post-Crash Prosperity, by Richard Florida.
5. 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, by Simon Johnson; a public choice analysis of the unholy alliance between finance and politics.
6. Holy Warriors: A Modern History of the Crusades, by Jonathan Phillips.
There are others, too. All of these appear to have merits.
Assorted links
Theory of optimal punishment, as applied to Haitian dominoes
Craig Stroup sends along the following photo:
That's one way to address the zero lower bound problem. Many other excellent photos can be found here.
Can the Canadian banking model work for the U.S.?
No, and Simon Johnson explains why. Excerpt:
Proposing a Canadian-type model to create stability in the U.S. is, to be blunt, nonsense. We would need to merge our banks into even fewer banking giants, and then re-inflate Fannie Mae and Freddie Mac to guarantee some of the riskiest parts of the bank’s portfolios. With our handful of new “hyper megabanks”, we’d have to count on our political system to prevent our banks from going wild; Canada may be able to do this (in our view, the jury is still out), but what are the odds this would work in Washington? This would require an enormous leap of faith in our regulatory system immediately after it managed to fail repeatedly and spectacularly over thirty years (see 13 Bankers, out next week, for the awful details). Who can be confident our powerful corporate lobbies, hired politicians, and captured regulators can become so Canadian so soon?
There is much more at the link, recommended.
From the comments
Steve S writes:
Steve Entin at the National Center for Policy Analysis has written on the very issue of the subsidies vs the tax exclusion. His conclusion:
Adding the subsidies for premiums and cost sharing, the family getting the health exchange policy would receive a total subsidy of $17,400, while the family receiving employer-based insurance would receive a total subsidy of $4,143.
That is a huge differential. The whole piece is here: http://www.ncpa.org/pdfs/Health-Insurance-Exchange-Subsidies-Create-Inequities.pdf
File under "Not a political equilibrium."
FCPA as embargo
It turns out Andrew Spalding has a paper on the topic. Here is the abstract:
Although the purpose of international anti-bribery legislation, particularly the U.S. Foreign Corrupt Practices Act, is to deter bribery, empirical evidence demonstrates a more problematic effect: in countries where bribery is perceived to be relatively common, the present enforcement regime goes beyond deterring bribery and actually deters investment. Drawing on literature from political science and economics, this article argues that anti-bribery legislation, as presently enforced, functions as de facto economic sanctions. A detailed analysis of the history of FCPA enforcement shows that these sanctions have most often occurred in emerging markets, where historic opportunities for economic and social development otherwise exist and where public policy should encourage investment. This effect is contrary to the purpose of the FCPA which, as the legislative history shows, is to build economic and political alliances by promoting ethical overseas investment.
These perverse and unanticipated consequences create two policy problems. First, the sanctions literature suggests that the resulting foreign direct investment void may be filled by capital-rich countries that are not committed to effectively enforcing anti-bribery measures. This dynamic can be observed, for example, in China's aggressive investment in Africa, Latin America, and Central Asia, and creates myriad ethical, economic, and foreign policy problems. Second, by enforcing these laws without regard to their sanctioning effects, developed nations are unwittingly sacrificing poverty reduction opportunities to combat bribery. The paper concludes with various proposed reforms to the text and enforcement of international anti-bribery legislation that would further the goal of deterring bribery without deterring investment.
*The Future History of the Arctic*
I loved this book, which is written by Charles Emmerson. Here is one short bit:
Despite the prominence of the colors of Norway on Svalbard — and the firm insistence from any government representative that Svalbard is an integral part of the kingdom of Norway — there are reminders that the archipelago is both something more and something less than that. Russians and Ukrainians live here, some in Longyearbyen, though most are at the Russian settlement at Barentsburg. The girls at the supermarket checkout counter speak Thai. Somewhere in town is an Iranian who came here six years ago and, under the terms of the Spitsbergen Treaty, was able to settle here. If he were to return south to the Norwegian mainland, he would almost definitely be forced to leave the country, his asylum claims having been refused. Import duties are nonexistent on Svalbard: Cuban cigars cost less in Longyearbyen, at 78 degrees North, than they do in Oslo, three hours' flight to the south.
Here is Wikipedia on Svalbard.
This book covers why and how Greenland might become independent, what kind of presence in the Arctic Canada can realistically expect to have, the changing historical fortunes of Vladivostock, what the Law of the Sea really means, and why Norway manages its fossil fuel revenues so well, among other matters. The Future History of the Arctic has fun and useful information on just about every page.
Assorted links
1. DSM-V quiz.
2. Beautiful new public library in Italy.
3. China sandstorms.
4. Markets in everything: pay girls to play video games with you.
5. The end of big government liberalism?
6. Mark Pauly on health care reform, via Austin Frakt.
7. Markets in everything: The Zaky.
U.S. job market bleg
What are your recommended readings on the current state of the U.S. job market? I thank you all in advance.
*A Brief History of Liberty*
That is the new book by David Schmidtz and Jason Brennan. It is ideal for anyone looking for a broad overview of human history from a classical liberal point of view. Self-recommending, as they say. Buy it here. Here are Schmidtz and Brennan on CatoUnbound.
Views I toy with but do not (yet?) hold
Financial panics and economic crises are nearly inevitable, for at least two reasons. The first is that policymakers are ill-informed and have poor incentives. The second is that bank managers, periodically, like to take risk and we are unwilling to shoot or otherwise severely punish the failed ones. Instituitions which transform liquidity can, sooner or later, find a way to take such precarious risks, no matter what the regulators do (it still may be worth trying regulatory restraint, however). There's simply not enough downside risk in a wealthy, humane society.
The nineteenth century financial panic will prove the "norm" for human history. The research question is how we avoided such panics for 1950-S&L crisis, or whatever you take the cut-off points to be. The capital controls of Bretton Woods may be part of the answer (plus that is a strange economic period in a number of ways), although it is not obvious such controls could be made to work today.
More and more, people will turn to the wisdom of the great 19th century economists on financial panics, bank runs, and the like. It was an intellectual mistake to think we had ever left that world for good.
I thank Benjamin Chabot and Mario Rizzo for useful conversations on this topic. Bill Easterly offers related remarks, as does Paul Krugman.
The Slartibartfast Principle
From Wired:
Canadian poet Christian Bök wants his work to live on after he’s gone. Like, billions of years after. He’s going to encode it directly into the DNA of the hardy bacteria Deinococcus radiodurans. If it works, his poem could outlast the human race.
If it is conceivable, just 57 years after the identification of DNA's structure, for a Canadian poet to imprint his poetry into the DNA of a living organism then isn't it probable that an intelligent designer in the past would have had similar desires and perforce much greater abilities to accomplish the task?
Thus the evidence for intelligent design ought to be readily available in the graffiti of DNA. "Slartibartfast was here," or perhaps "3.14159265," or given what we know of economics, "All rights reserved, MegaCorp. Call for a free estimate."
The fact that we have not found such evidence reduces my belief in intelligent design, although I am not against more investigation. Indeed, one of the few arguments for god that I have ever given much credence to was the putative discovery of codes predicting future events in the Bible. A serious paper on this topic was published in Statistical Science in 1994. The paper was later convincingly rebutted but I still think it was the best evidence ever presented for an intelligent designer.
Addendum One: Interestingly one of the few people who thought as I did, although coming from a quite different direction, was Nobel prize winner Robert Aumann who early on supported the Bible codes research. However, after further research, supervised by Aumann, concluded that the paper could not be replicated Aumann returned to his prior view that the codes were improbable. It's unclear what, if anything, would further shift his prior.
Addendum Two: Steven Landsburg was here yesterday and at lunch suggested that perhaps the great designer's name was in fact 3.14159265…
Gender risk-aversion, using data from chess
Dan Houser sends me a link to this paper, by Christer Gerdes and Patrik Gränsmark:
This paper aims to measure differences in risk behavior among expert chess players. The study employs a panel data set on international chess with 1.4 million games recorded over a period of 11 years. The structure of the data set allows us to use individual fixed-effect estimations to control for aspects such as innate ability as well as other characteristics of the players. Most notably, the data contains an objective measure of individual playing strength, the so-called Elo rating. In line with previous research, we find that women are more risk-averse than men. A novel finding is that males choose more aggressive strategies when playing against female opponents even though such strategies reduce their winning probability.
I am pleased to see that studying chess data is suddenly a "trendy" way to do behavioral economics. Admittedly one is dealing with an unusual group of subjects. Yet the quality of the data is high and the stakes are usually high too. Computers can be used to judge the quality of moves.
Law and order in the world’s newest city
Remember that tent city on the former Petitionville golf course? Here is the latest:
…an unarmed Haitian security force, composed of about 200 volunteers wearing neon yellow vests, patrols the golf course, trying to mediate disputes.
“We get a lot of cases: men beating up women, women beating up other women, people biting off other peoples’ ears,” said Romulus Renald Black, one of the volunteers. “We bring them into our security tent, judge them, and, if it’s a big case, we call in the police.”
Another patrolman said that there had been several rapes and assaults but only one killing. As to the number of ear bitings, Mr. Black said, “You’d be surprised.”
“Given the conditions, it has been remarkably calm and brotherly here,” said Clerveau Rodrigue, who has emerged as one of the camp’s leaders.